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Oracles Wild Numbers, Klarna Starts Trading, and Novo’s Next Move 9/10/25
00:43:10
Analysts left ‘kind of in shock’ after Oracle reports eye-popping cloud demand numbers, sending the stock soaring and making Larry Ellison the world’s richest man. Buy now, pay later service Klarna starts trading after delaying its IPO. Plus, Novo Nordisk announces big job cuts.
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Commercial Narrator
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Melissa Lee
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Leslie Picker
You're listening to the Exchange. Here's today's show.
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Melissa Lee
Welcome to the Exchange. I'm Melissa Lee alongside Mike Santoli. Stocks mixed today with the S and P. NASDAQ hitting a record high on the back of softer than expected inflation data and blowout numbers from Oracle. Bond yields, we should note, also moving lower.
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Mike Santoli
Tech, utilities and energy are leading. Staples are lagging so far on the day. Crude and Brent moving higher as Poland said it shut down Russian drones overnight. And the crypto space also in the green with both Bitcoin and ether higher either. Take it all together, Melissa. And it seems as if, you know, you continue to call the bears bluff on all these things that could knock the market off course. The pie was one of those this morning. Clearly. The bond market rallied huge. Yields were down a lot. The stock market seems to have gone beyond the whole question of is inflation going to be a problem. And so far nobody's really making them pay for that. Right. I mean, the softer pie number, we don't know if it really feeds into CPI that directly. But, but it's at least affirming this idea that the Fed can do more than we thought they were going to do just a month ago. And the stock market's happy to just kind of hit yourself to that.
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Melissa Lee
I mean, Rick Reeder just Yesterday was saying 50 today, David Zervis was saying 75. So, so I mean, that number gives us permission to believe that's right, that that could be in the cards potentially. But of course, a lot of this is about, you know, you mentioned some of the, the holes that could Sort of stop the bulls in their tracks. And that was the AI narrative and whether or not that's flowing. And of course Oracle answers that in a big way. But you made some very good points about why we're not seeing the huge pop that we're seeing in Oracle Translate.
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Mike Santoli
I mean broader markets, some of the immediate stocks that are directly impacted by this massive push in demand are up the hardware place but from a portfolio basis, Oracle was like point 7% of the S and P as of last night. Now it's going to get up toward 1% or so. But because Larry Ellison owns like 40% of the stock, it's not as big in the index as you would imagine it to be at close to $1 trillion market cap now. And so I also think there's a sense out there that the baton is being passed from core I play to the next as opposed to every single incremental bit of good news lifts all those boats. So I think that's the world we're in for a little while.
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Melissa Lee
Yeah. Let's get into the Oracle story. You're seeing the chart there. Up about 40% right now after blowout result last night. Best day since 1992. We're witnessing today the stock closing in on $1 trillion in market cap after adding nearly $300 billion overnight. The company's first quarter results leaving analysts stunned. Morgan Stanley calling a tectonic shift in the business model. Citi saying it's one of the most amazing multi year revenue guides in software history. Deutsche bank simply calling it truly awesome results. The rest of the streets mostly positive on the stock. 27 Buys 14 Holds Only 1 Sell this according to to facts that I mean the Stock was up 40% since credible since the summer. So I mean it's not like it hadn't run into this report.
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Mike Santoli
It's a nearly 50 year old company that's like on the fly transforming to a hypergrowth story. So I mean that's what the market is trying to catch up to is that absolutely monstrous pipeline of orders that they announced last night. I also think it's worth reminding that most of the business of Oracle is not that part of the business is not a play on air infrastructure build out. You know, Morgan Staley breaks it down into the growth parts, the neutral parts of the business and the declining parts, the growth parts. 30% right now they say in 2029 it's going to 76% of the company. And that's what everyone's now anchored to is some 2029 guidance of just how much they're going to have in terms of this build out in terms of their exposure to all these massive spending clients. You know, I guess you have to wonder if it's all going to, it's all going to come through. But right now the stock is trading at 22 and a half times the 2029 estimate.
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Melissa Lee
Wow.
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Mike Santoli
Of, of Morgan Stanley. The whole market right now the s and P500 is 22 and a half times the coming year's earnings.
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Melissa Lee
This year's the transformation is notable in terms of how we think about the stock, how Wall street has thought about. I mean if you, if you just take a Look at the 10 years ending in 2022, the average revenue growth rate of Oracle was 1.6%. I mean that's how, how much the business has absolutely just transformed in a matter of years here. And so our thinking about exactly legacy technology and how we are regarding Oracle today is completely different.
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Mike Santoli
Rewritten no doubt. So we'll see if the market is, is right in making this bet right now. So. All right. We are still awaiting Klarna's first trade. Shares of the buy now pay later. Service pricing at $40 last night that was above the expected range. It valued the company at about $15 billion. Klarna is currently indicated to open a good deal higher. I think it was, it was looking in the 50 or something like that. Yeah. Let's head over to the floor of the New York Stock Exchange where our own Leslie Picker is joined by pg. He is head of DMM floor trading at Citadel Securities.
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Leslie Picker
Hey Mike. At those shares set to open imminently, essentially as you mentioned, it's indicated to open between 52 and $53 which would be significant upside from that $40 per share that this company priced at last night. Peter, as you mentioned, he is in the middle of getting these shares ready to open. He's known as the designated market maker for this deal. Meaning he's basically paring the demand for shares at certain price points, figuring out what the most stable level is in order to see an opening. So we'll get him for a one on one as soon as he gets those shares open. In the meantime, this is a 20 year old company, one that has rumored to go public for a while now. They were looking to do so back in April, around that April time frame and then Liberation Day and it's ensuing volatility caused them to push the deal or pause it at least temporarily. Today they are ultimately seeing that debut come to light. It sounds like it's set to open momentarily if I can kind of listen with one ear and talk to you all with the other. Says very close. That's. That's Peter here saying best limits. Very close to opening at this point in time. Of course, this is one, one of a slew of IPOs we've seen recently and more to come as the month of September and into the fall progresses. And that's because the markets have been pretty hospitable for these deals. This one, case in point, pricing $3 above the range and set to open at least about 30% higher from here, which would imply a valuation of about $20 billion, which is still below the level that it raised privately in 2021, above the level that it raised privately in 2022, and of course, above expectations as this company went about its roadshow and found demand from investors on the road. And so this is a company that plays into the buy now, pay later space, the financing space, fintech space. Its peer is up. Affirma is up about 45% this year, which bodes well for valuations, is oftentimes public market. Investors are looking for comparables to kind of see where they should be pricing these new issuances. And so that bodes well. All of that is a tailwind. The growth is strong, up about 21% on the top line year over year. Sounds like it's open at this point in time. Opening at 52, 10 or so. All right. You could see CEO Sebastian Semiakowski ringing the bell there. Lynn Martin, the president of the New York Stock Exchange, giving him a hug. And then we have Peter over here who is going to give us a sense of the internals that he saw as he got this stock open for trading today. Peter, what do you make of all that?
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Peter Giacchi
Hey, Leslie. So first of all, really exciting day for Kloner in the New York Stock Exchange. You could see we opened at 52 on about 5 million shares, and we're trading right there right now. So really good to see good demand for another IPO with over $1 billion raise in the market. So definitely shows that the IPO markets are coming back to life.
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Leslie Picker
Can you give us any sense of what you saw as you were paring the demand from the buy side here? Anything you can provide in terms of retail versus institutional interest and so forth?
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Peter Giacchi
Yes. So the data that I see is really post trade data that happens. So there's going to be a mix of obviously retail and institutional flows here. What we saw specifically in this IPO that it moved up over the course of a couple of hours. But it traded in a very, very orderly fashion on those indications, meaning that there was more institutional flow on the opening here today.
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Leslie Picker
So does that suggest to you essentially that there's some support at these levels, you know, for a longer period of time?
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Peter Giacchi
Yeah, I think that when you think about the IPO market in general, what we've seen for the IPOs is right now the larger ones are all trading above their issuance price. I think normally with IPOs, it takes anywhere between five and seven days for them to settle down and actually figure out what the street wants to value the mat. So this is one day of a long, long road for Klarna. It's a positive day. So I think that what we need to see is over the next five to seven days, really, where the street thinks the valuation.
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Leslie Picker
And how do you characterize, I mean, a 34% pop? Anything in this range is usually what people in the banking community would say is a really good deal. You didn't leave too much on the table, but still gave people decent gains from the IPO price. Is this the kind of outcome that you expect to see and do you think that bodes well for other companies that are waiting in the pipeline?
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Peter Giacchi
Yeah, I think that, you know, obviously as a trader, it's a little different for me, but I think that CFO, CEOs, founders, it's always difficult to figure out how much they're actually going to price and where they're going to leave a little bit, maybe more for. For a pop on day one. So I think it's an art more than a science. Again, I think when you think about situations like this, it's a. It's a small percentage of the company that was raised in the public markets. So I do view it as positive. Any time I think a company could come to the public markets and raise $1 billion is actually showing that there's a lot of health for the company and for the public market.
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Leslie Picker
Yeah, only about 17% of the float is primary issuance, meaning it's what the company sold and raised. So it's largely selling shareholders. I believe Mike Santoli has a question for you back in studio. Mike?
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Mike Santoli
Yeah. Hi, Pete. I mean, and really just to follow on Leslie's question, you have seen some of these other recent deals, including some you've handled. I mean, they'd be a double out of the box. It seems as if some of the demand, you know, kind of took the middlemen by surprise a little bit. So this one feels like it's a little more controlled and maybe it's a known quantity given that the company has been around and kind of a large valuation in the private markets for some time.
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Peter Giacchi
Yeah, I think that's, that's definitely part of it. I think that people have been waiting quite a while for Karner to come to the public markets. I also think, Mike, as you know, the markets have a very good way of learning about what's happened in the past. And I think sometimes you look at previous deals and see where things could have been done a little bit differently. If you look at this, the original higher end of the range was 35. It wound up pricing at 40. So I think when you think about that and then see on top of that, the 30% pop, it's, it makes sense for where it actually opened.
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Leslie Picker
All right, Peter Giacchi, Citadel designated market maker for this ipo, the Klarna ipo. Appreciate your time this morning. I know it's a busy one for you, so thanks for sharing your insights with us. Melissa, I'll send it back to you in studio.
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Melissa Lee
All right. Thank you. Leslie Picker joining us now for more in Klarna, Scott Rain Sweeney, managing director at Redpoint Ventures, early backers of Snowflake, Stripe and Netflix, among other investments. Scott, great to have you with us.
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Scott Rain Sweeney
Great to be here and great to celebrate another ipo.
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Melissa Lee
Another ipo? There has been a long list. It's been a strong slate and the slate continues. Is this just a window of opportunity in the markets or do you think that there is a strong crop here just waiting to go public?
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Scott Rain Sweeney
You know, we've had 12 IPOs so far this year. That compares to nine last year and six the year before. So we're showing some strong momentum now. There's 12 that have gone public. Eight of them are trading well north of their offering price. So I think there's a lot of demand here by public investors to back these high growth tech companies. And the pipeline is strong.
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Melissa Lee
These companies, Many of these IPOs, though, they have been private for longer. Part of that might just be the function of the markets allowing companies to be private for longer. It's a, it's a more forgiving environment for companies to grow and to spend. But do you think that that makes sort of how we view the crop differently and how it trades on the first day differently?
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Scott Rain Sweeney
Yeah, perhaps. I mean, the reality is the bar is higher to go public right now. You know, the average company here this year that's gone out is trading. It has revenue over $1 billion. They're growing at over 30% and they, they're profitable. And that compares to seven years ago where these companies were about 330 million in revenue. They were minus 20 in EBIT. And so these companies are staying private longer. They're having to mature and grow because the bar is higher to get up.
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Mike Santoli
Scott, as you look at company startups and those that have been around a little while longer from various industries, wondering about your view of fintech, for lack of a better term, because I think it's an imperfect term, but it is kind of overrepresented in a lot of these companies that have been poised to come and have already come public. And is it something that actually seems like, you know, these companies have a genuine edge, they're solving a problem that's really out there, or is it just kind of, you know, the same kind of product with a new software and interface?
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Scott Rain Sweeney
You know, I actually, you know, I think that these companies have demonstrated that they have unique value propositions that are solving real problems for customers. I, I think why you're seeing a lot of fintech companies go public now is because fintech was a real hot area of investment on the private side back in 2018 through 2021, 2022, and these companies are now just maturing and getting out.
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Melissa Lee
Where are you seeing the most competition in terms of dollars, where you put your money, Scott, on the private side right now? I mean, is it all, I mean, where do you see the most sort of competition to put your dollar versus somebody else?
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Scott Rain Sweeney
It's a, I mean, this is without a doubt, I mean, I would say this is probably going to be the greatest period of value creation the tech industry has ever seen. And it's going to be driven by AI. These companies are pursuing markets that are dramatically bigger than the markets that the cloud and mobile companies that power tech investing over the last 15 years were pursuing. They're growing really quickly and they're doing it really efficiently. So I am incredibly bullish about the future of tech and also kind of the IPO pipeline. In the future they'll be driven, I think a lot by these companies.
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Mike Santoli
What are the areas when, when you see these AI driven companies that are targeting these big markets, markets, who holds those markets right now? I mean, you're starting to see obviously pockets of weakness in things like IT services, publicly traded software of certain types. So where are they actually attacking?
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Scott Rain Sweeney
No, I think anywhere where you see a collection of humans performing tasks, maybe some data manipulation or monitoring, I think those things are likely to be impacted by, by AI Clearly Coding and the number of developers out there I think could be impacted by what's happening in the trends in AI. And so, you know, all those areas. But I also think there's a whole set of areas which have never really been addressed by software companies in the past because you really couldn't build meaningful businesses attacking these markets. Now we can go after these vertical markets and because we're optimistic, delivering productivity gains in meaningful ways, we can charge a lot for the services these companies are delivering and therefore create big markets out of what historically hasn't been really big opportunity.
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Melissa Lee
You know, Scott, earlier in the week the conversation was all around, is AI adoption actually slowing? And I'm wondering from your standpoint, what are sort of the data points, the metrics that you look at to make sure that that story is in fact intact? I mean, Oracle last night, that was a huge point on the positive side of the ledger. But what do you look at?
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Scott Rain Sweeney
I mean, I am, the reality is you can look at anecdote after anecdote, a public company where they're talking about how AI is accelerating their businesses. And the reality is we're so early in all of this, you know, I think that is going to impact every company that's listed on these public exchanges in some meaningful way by driving productivity gains. And we're at the very early stages of that happening. And so I'm really bullish. I, I do think one thing that we have to keep an eye on is there's a lot of experimentation happening by companies now that are investing in AI and some of that is going to turn into real dollars over time. Some of that might go away. So we have to kind of pick and choose through that. But I, I think that the future is incredibly bright here.
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Melissa Lee
All right, Scott, great to see you. Thank you. Scott. Rainey, Redpoint Ventures. And we're taking a look at Klarna, which just opened just about five minutes ago.
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Mike Santoli
It's trading up 18% or 19% now. So it's somewhat moderated there. And you know, mentioning some of the others like the Figmas and Circles and Bullish. Yes, which really did a big pop and circle and Bullish had the crypto gloss on it, which probably just brought an extra source of energy on that first trade, that first flush of demand. So we'll see how this one goes. Now you have a firm being the public comp that you can trade against.
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Melissa Lee
Coming up, Oracle crushed earnings. But could there be a major headwind to hitting its longer term guidance? That story's next.
- [18:15]
Sempra Energy Announcer
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Mike Santoli
Episode is supported by FX's the Lowdown, starring Ethan Hawke.
- [18:50]
Commercial Narrator
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Mike Santoli
Raybon, a quirky journalist, rare bookstore owner, unofficial truth seeker who is always on the tail of his latest conspiracy.
- [19:00]
Commercial Narrator
This time, his most recent expose puts.
- [19:03]
Mike Santoli
Him head to head with a powerful.
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Commercial Narrator
Family that rules Tulsa.
- [19:06]
Mike Santoli
Meaning only one he must be onto something big. FX is the Lowdown premieres September 23rd on FX stream on Hulu.
- [19:15]
Commercial Narrator
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- [19:45]
Melissa Lee
Oracle's rising tide lifting several boats in the tech space today. Coreweave up 20%. Arista Networks coherent Nvidia firmly in the green Today is the first gain of more than 2.2percent for Nvidia in more than a month. Not there. Also Broadcom, which has been a huge winner. It's about 10% right now.
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Mike Santoli
Yes. Broadcom's had this huge run since last Friday in video. I mean, this in a way arguably rescued that stock a little bit because it had sort of threatened to break down. It gets below the 50 day average. It was below 170. And so even though it's not a massive move, it is in market cap in percentage terms. I do think that, you know, it shows you it's just been dangerous to keep calling the peak, you know, in these air waves.
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Melissa Lee
I mean, we have to point out the Journal article today that said, is is Oracle the new Nvidia?
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Mike Santoli
Yes.
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Melissa Lee
Is Oracle the new Microsoft? I mean, you can also say, is Oracle the new Microsoft software company? Gone to cloud, gone to cloud infrastructure?
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Mike Santoli
I think the Nvidia analogy is mostly because of the massive step function in revenue growth based on like one quarter's guide and all of a sudden it sort of, you get anointed as, as the key bellwether play in the group. But you know, we've kind of cycled through a lot of other candidates here. Remember Super Micro is going to be one of these core weave, of course. So I think there's a, there's a, you know, I don't think Oracle is in those categories but there is a risk here that people just kind of overplay their hand initially. But it is better than 2023 into 2024 when really Nvidia and Microsoft are the only ways to get a defined bet on it.
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Melissa Lee
We should point out that names like Digital Realty and Bloom Energy, they're also higher as they are becoming essential players and literally powering Oracle to hit its longer term guidance. Our next guest says without Oracle making major investments in power from here, it may not get there. He's sticking to his neutral rating on the stock, but did raise his price target from 195 to 310. Let's bring in RBC Capital's Rishi Jaluria. Rishi, great to have you with us.
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Commercial Narrator
Yeah, thanks so much for having me.
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Melissa Lee
It seems like this should be a sizable asterisk to their, to their guidance, especially when you're taking a look at guidance that's, that's five years out for the cloud business, Rishi. And I'm wondering if, if that could actually be the throttle to Oracle's growth story. The power supply.
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Commercial Narrator
Yeah, and look, it could be a lot of things. Right? That's always the risk with giving these really long term targets. Looking out to 2030. Right. Obviously sounds impressive that you're going to have about $145 billion of OCR revenue FY30. But you're exactly right. Like we have to think about, you know, allocation of use. You have to think about, you know, demand continue to inflect upwards. You have to think about all these contracts and that they have and all of them just kind of being able to meet all their obligations. Right. Because everything's trading on RPO here. And so power could be a huge one, you know, and we've heard from a lot of other vendors, they're already contemplating about power shortages down the line. You've seen Microsoft make investments in nuclear energy. You've seen other competitors make similar sort of investments in the power area. You know, I think Oracle is going to have to make some of those investments. They've been saying that it's not expected to be a near term headwind but I think if you're guiding out five years, you know, we need to have a little bit more of a cohesive strategy around where exactly all that power is going to come from.
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Melissa Lee
So then you start having to think about this revenue growth, but at what cost? There's the other capex, whether it be the infrastructure directly related to cloud, the investments in the energy needed to power all of these data centers as well as infrastructure. And then there's also the notion that, you know, this is a business that is, it could be single digit business in terms of margins. I mean what kind of quality is this revenue growth in your view?
- [23:23]
Commercial Narrator
Yeah, no, look, it's a really great question. I would, I would posit two things here and this is what's keeping me neutral. And clearly I've been wrong on the stock given the performance but, but you know, kind of things keeping me neutral here. Number one is a lot of this. You'll notice the deals they're doing are excess capacity deals, right? We've heard of Microsoft and Amazon and OpenAI and everyone talking about being severely capacity constrained even when it comes to GPUs. Oracle has a lot of allocation of GPUs, they have a lot of excess capacity and they've clearly benefited from that tailwind time and time again. So that's one thing that I say. Well, what happens when we actually start to hit parity in terms of capacity? Does some of that start to get pushed away from Oracle? I mean Microsoft has talked about wanting to bring all of this back in house over time and Microsoft is obviously a major customer as is Open Air here. So that's piece number one. I think piece number two that we really need to think about is, is exactly to your point. What is the margin on this? You know, by my math, you know, some of this margin could be. Some of the margin on OCI could actually be for certain training use cases negative. Right. Hopefully as the balance of the power shifts more towards inferencing and fine tuning and you think about reallocating those clusters away from inferencing to fine tuning, there's maybe a little bit of margin uplift. But you know, the idea that this can be a very, very margin accretive business. I need to see more evidence before I could begin to believe that.
- [24:39]
Mike Santoli
Yeah, I was going to say that all sums up I guess. Why you remaining neutral on the stock even with this huge jump in in revenue guidance? What are your preferred ways to try and get leverage Though to the these longer term trends. I mean I know Microsoft is probably still right there.
- [24:56]
Commercial Narrator
Yeah, look, Microsoft is still top of my list. I would say, you know, I would. What, what Microsoft is doing to me is higher quality revenue because it's not just at the Azure layer and they're being very picky key about, you know, where they're actually building out and where they're walking away from lower margin businesses. But it's also at the, you know, the data layer, the developer layer with GitHub Co Pilot, at the application there with M365 Copilot. They're monetizing AI throughout the entire stack and I think they're actually innovating around it, not just providing, you know, bare metal and GPU capacity. So Microsoft is my favorite way but I think there are a few under the radar ways to really play AI. And I'm saying this is a huge bull on AI as technology is a, you know, 5, 10, 20 year trend. You know, I think MongoDB as as a way to play of net new generative AI applications, especially those leveraging unstructured data. I think HubSpot, you know, is a great, has a great innovative roadmap and as we think about AI changing the way sales and marketing occurs, I think they can be very well positioned there and even Intuit, I mean it's a name that everyone knows with TurboTax and QuickBooks, I think there's a huge opportunity for them to leverage generative energetic AI and really bring that to, you know, individuals and have virtual agents that do your taxes and close your books for you. So those are three, I would say more under the roller ways to play AI beyond Microsoft and Oracle.
- [26:11]
Melissa Lee
I would love an agent that did my taxes. Rishi, thank you.
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Scott Rain Sweeney
Thank you so much.
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Melissa Lee
RBC Coming up, Robinhood rolling out its own social media network, hoping to lure traders away from Reddit's WallStreetBets platform. We'll take a look at the battle of the brokerages next. Before we go to break, check out shares of Klarna just opened for trade just about 15, 20 minutes ago. We're now trading below the opening price of 52. It's now trading 47. The exchange will be right back.
- [26:36]
Sempra Energy Announcer
The world runs on energy and as demand increases, Sempra is rising to help meet the challenge. Through our Texas and California utilities, we're investing billions to help power these booming economies. We're building tomorrow's energy infrastructure today, modernizing one of North America's largest energy networks with next generation technology to Power the everyday lives of nearly 40 million people. That's positive energy. Learn about Sempra's financial results@sempra.com investors at.
- [27:06]
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- [27:20]
Leslie Picker
Edu.
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Melissa Lee
Welcome back to the Exchange. Robinhood is launching a social network for investors seemingly aimed at taking traffic from the Reddit Wall street bets crowd. Here's what Robinhood CEO Vlad ten have told Squawk on the street this morning about the company's plans.
- [27:37]
Scott Rain Sweeney
We're really building what I call a financial super app. We want to be the place where you can meet all of your financial needs at the lowest cost and with the best possible user experience.
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Becky Chad
I think the product velocity that we.
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Scott Rain Sweeney
Saw last night is just an example.
- [27:51]
Becky Chad
Of how much work we've done. But. But also how much work there remains to be done.
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Melissa Lee
This is all part of announcements at the Robinhood Summit, which is going on in Las Vegas. They also announced a lot of other features like for instance, short selling, futures trading, index trading overnight.
- [28:10]
Mike Santoli
I mean, they're obviously rounding out the product offering. They're kind of adding on to what was really just a user interface people loved. And they discovered when they discovered meme stock trading, I mean really that was a lot of the growth. They found the business model kind of after the fact. But it's amazing because it's $105 billion market cap company that continues to sort of make a big fuss about rolling out product offerings that the competition already has. Right. Like as you mentioned, I find the social aspect really fascinating because it really is a massive hive of people like on Discords and in Reddit and on Twitch that are just doing nothing but collectively trying to trade.
- [28:47]
Melissa Lee
Right.
- [28:47]
Mike Santoli
And get ideas from what one another.
- [28:49]
Melissa Lee
And they're also.
- [28:50]
Mike Santoli
And trash talk one another.
- [28:51]
Melissa Lee
Yeah. And they're anti establishment. I mean they're anti institution. And so that's where Robinhood really fits in. And as long as this building everything that you said is 100% right. But at the same time, if they could build this ecosystem of the next generation of traders, then they could be that next generation Schwab.
- [29:09]
Mike Santoli
Exactly. You just get the entrenched. And so we see there the stock performance that's since Robinhood's ipo. So you see it was up and down and then interactive brokers, which really is kind of a quasi institutional customer base kind of mini hedge funds and such. And Schwab is dragged. It's mostly a bank really in terms of the economics of it. But I would just point out that when Schwab came around, it was the revolutionary.
- [29:32]
Melissa Lee
Sure. And then trade and E trade were the revolutionary.
- [29:35]
Mike Santoli
So at some point Robinhood is going to become the incumbent and boring, but it's going to be a great business, probably right.
- [29:41]
Melissa Lee
All right. Now let's get to Contessa Brewer for a CNBC news update.
- [29:44]
Contessa Brewer
Contessa, Melissa, Mike, three former top FBI officials are suing the bureau's director, Cash Patel and Attorney General Pam Bondi. In the lawsuit filed today, the officials, including former acting Director Brian Driscoll, said the White House and the Justice Department ordered their firings for political reasons and then Patel followed the orders to stay in the president's good graces. The FBI and the Justice Department department have yet to comment. A federal appeals court upheld the Federal communication Commission's nearly $47 million fine against Verizon over illegally sharing access to customers location data. The three judge panel rejected Verizon's argument today, ruling that that data is protected by statute. Last year the FCC fined the nation's largest wireless carriers nearly $200 million in total for mishandling customers personal information. And NASA says a martian rock sample may contain evidence of ancient microbes. The Mars rover Perseverance collected that rock and scientists say the microbial bio signature isn't direct evidence of life itself. But NASA's associate administrator said it's the closest scientists have come to discovering ancient life on Mars. Look, the big takeaway here is that they discovered something, something biological in origin on the red planet. Big discovery.
- [31:03]
Mike Santoli
All right. We have neighbors, I guess. Thank you contest or had them. Coming up, it's back to the future for Deutsche bank. Returning to the firm's original year end price target of 7,000 for the S&P. That implies 8% upside. From here, Deutsche Bank's chief global strategist joins us next. We're back in two minutes. The race is on to lift S and P year end targets. With stocks sitting near record highs. Deutsche bank upping its target from 6,550 to 7,000. That's back to its original forecast from the beginning of the year. And that is now the second highest target on the street. Here with us with his call is Becky Chad, chief global strategist at Deutsche Deutsche Bank. Good to see you.
- [31:43]
Becky Chad
Good to see you.
- [31:44]
Mike Santoli
So you're the path of your target somewhat reflects the way the market has experienced this year. Right. I mean, it's like a major scare. We needed to reevaluate a lot of things, tariffs, the economy, the Fed and the markets. And now we've restored some sense of predictability. So why do you think there's more upside?
- [32:02]
Becky Chad
That's exactly right. I mean, the way I would put it is basically we had a big shock, or what seemed like a very big shock, the tariffs. And that really upended the market. It upended our views. We were very negative on the impact. But, you know, facts are facts. And so far, the tariffs don't seem to be having much of an impact on growth, much of an impact on inflation. Earnings growth actually went in the other direction and picked up in the second quarter. And if you listen to what companies say, they are basically saying that, you know, yes, it's a shock, yes, it's negative, but it's manageable. It's going to grow, but it still manageable. So we started at 7,000. So we're going back basically to 7,000. I would say forward looking. Key sort of way of thinking about where the market's likely to go is, you know, obviously the market's at new high, basically. And so that kind of suggests to most people that everybody's piled in. You know, the market's overweight. Technically, the market is currently overweight, but that's all coming from systematic strategies. So all of the discussion about fundamentals and what we call the discretionary investors, their positioning is neutral, hugging neutral for the last two months. That's one source of upside. We have a little bit built in for flows. And then there's buybacks, which is, again, back to earnings. So if earnings are fine, we think buybacks will be fine. You put those three things together, that argues for, as you noted, 8% and that it's back to 7,000.
- [33:41]
Melissa Lee
How do rate cuts factor in? Does it matter if we go 50 or 75 by the end of the year? And I'm just wondering, are the reasons behind the rate cuts? Does that override lower rates in terms of lower rates, meaning, you know, there could be a growth scare?
- [33:56]
Becky Chad
Sure. So what I would argue is, you know, in terms of our view, it's really based on the macro, and it's really about the growth part of the macro row and earnings. So I think rates are sort of important for, you know, rotations and reallocations within the equity market. But I would say, you know, right now, quite a lot is priced into rates already. So it has to be, you know, a notable surprise relative to that I would argue it's not the short term rates but the more sort of medium and longer term rates that matter and they've already priced that in and if anything, you know, likely to go in the other direction if there's some disappointment. So near term. Yeah, I mean, you know, I think it's sort of a sideshow unless it delivers a really big surprise.
- [34:44]
Mike Santoli
Yeah, the medium and short term rates, it's been an interesting test or experiment in the sense of while we've priced the market for a lot more rate cutting and the yields came down on the long end, meaning they're not saying that's a big mistake because you're going to let inflation out of the bag. Right. I imagine the pushback you might get to do, your thesis is well, we haven't seen the tariff effects fully yet and there's a lot in train and companies maybe kind of were quick on their feet initially but you can't hide, you know, 300 billion a year forever.
- [35:16]
Becky Chad
There's no doubt about it, there's a risk. And so you know, what we're basically saying is that, you know, where you end up in the probability distribution is likely to the other side if you, you know, we've all had a lot of time to think about the tariffs in hindsight. I mean if you identify basically companies that are directly impacted by the tariffs, there's a lot of different ways of doing that. You know, you end up with 17% of earnings 1 7. That's kind of small and Apple is 5 percentage points of that. So they were talking about 12% of the S and P, you know, and the point I would make is it's not impacting basically the aggregates. We're talking about the market, the market's about the aggregate and there's plenty of other things going on. So I would argue there there's plenty of room for upside now. I mean the trajectory we've been on and we are back in the trajectory of the prior two years. So the trend channel is very tight, very steep. That's 24% again year. That's a not unlikely to be sustainable in the very long run. But you know, we are where we are and we have been moving in the last two months right along the bottom of that channel. Yeah.
- [36:33]
Mike Santoli
How reliant are we? Are your earnings expectations on the momentum in the trade in those sectors?
- [36:41]
Becky Chad
A pretty reliant but we're not really, really that far from the consensus. As you know, the consensus has been building in the bottom up analyst consensus has been building In a slowdown in AI and tech for quite a while. And you know, it has kind of happened. I mean if you start at the beginning of last year, we're talking about for the sector as a whole, you know, for mega cap growth in tech, 40% earnings growth, we got down to 25% in the first quarter, quarter and then in the second quarter we went in the other direction. We went up to 28% last night. Results tells you that basically, or tells us anyway that you know, investors are basically positioned for that slowing. I mean and our measures of sector positioning basically show that. So, so you're positioned here and earnings growth is here, but it's coming down. And so, so you're going to have these fits and moves. I would argue you kind of want to be neutral here. You don't really want to be underweight.
- [37:44]
Melissa Lee
Thank you. Thanks. Thank you, Chad. Deutsche bank, by the way, before we had to break 10 year yield. This is something that we are watching very closely. 4.03%.
- [37:53]
Mike Santoli
Yeah.
- [37:53]
Melissa Lee
So we're very close to the April.
- [37:54]
Mike Santoli
New low for this last run here. So 4.04 the other day. Great.
- [37:58]
Melissa Lee
Coming up, just last month the Danish government cut GDP expectations by more than half, citing nobody. Novo Nordisk headwinds specifically and tariffs on Danish exports. Novo shares down another 3% since then as competition in the weight loss drug space stays heated. Down 37% year to date. Excuse me, Rival Eli lilly down about 3% while hams and hers has doubled. The drastic step Novo's new CEO is taking to try to catch up. That's next. Welcome back. Shares in Novo Nordisk up as much as 4% premarket. But since paring those gains after the company announced it will cut 9,000 jobs or more than 11% of its workforce shares. Novo shares were higher today, but down more than 60% from their all time high back in June 2024. Bernstein sees light at the end of the tunnel. It upgraded Novo to an outperformer with a price target indicating more than 50% upside. Writing quote, the obesity growth engine is now underappreciated. I mean the fall from grace for novo, the weight loss space in general, but Novo specifically has really been quite harsh. And right now it really is a show me story. I mean to see the reaction in the pre market market to these cuts which is to reduce complexity as well as expenses in order to reallocate that money into R and D, which is what they are really seen as being behind in. It was positive and now it's basically flat. So it's really, you know, a show me stock.
- [39:17]
Mike Santoli
I mean, I think the stock is back to where it was like three years ago. I mean, it's really unwound.
- [39:21]
Melissa Lee
Yeah.
- [39:22]
Mike Santoli
Lilly of course has fared better on a relative basis. It's definitely off its own highs as well. But clearly the market has decided that they have the edge in terms of, you know, the new products, the efficacy and things like that. And you know, we'll see. At one point it was like the pie is going to be growing so fast.
- [39:37]
Melissa Lee
Right.
- [39:37]
Mike Santoli
There was going to be for everybody was a scarcity story. And, and it's obviously switched from there.
- [39:42]
Melissa Lee
Yeah. But this is a pretty quick, a swift restructuring by the CEO which was put in place in July of this year. So, you know, within a couple of months he came out and slashed the headcount to cut costs. Keep in mind though, headcount grew by about 80% in five years to keep up with the scaling that needed to be done to meet demand in the market and they still weren't able to completely meet demand for many of those years.
- [40:06]
Mike Santoli
We're going to have to look and see what it means for trade deficit and trade flow. I mean, it was accounted for such.
- [40:11]
Melissa Lee
A huge chunk of Denmark. Exactly.
- [40:14]
Mike Santoli
Amazing. All right, coming up, another entrant in the driverless taxi wars. The details on Amazon's foray into ride hailing. That's next. Let's get another check on Klarna. Shares are higher in their trading debut, but still below the opening price of $52. The IPO trade is issued at 40. It is now up 20% from that offering price. The exchange will be right back. Amazon making its long awaited leap into the Robotaxi race. The company's self driving Zoox vehicles hitting the streets in Las Vegas today. Mackenzie Segalos has more in today's tech check. Matt.
- [40:50]
Melissa Lee
Hey there.
- [40:51]
Mackenzie Segalos
So we are talking about a first of its kind vehicle. No steering wheel, no pedals. You can see it here in this exclusive footage captured by CNBC's digital video team during a ride along. Now it's a limited launch, but a meaningful one. Zoox needed special regulatory clearance just to carry passengers given the car's novel design. But Amazon enters as the third major player in the US Robo taxi race now going head to head with Alphabet and Tesla. So Waymo, it's got scale. They topped 10 million paid rides since launching five years ago. And they're expanding fast into cities across the U.S. they're also available on Uber in some markets. Tesla's rollout is Narrower but it controls manufacturing and that presents a major advantage. Now that said, it's still limited to geo fenced areas in Austin with human oversight. And its Robo Taxi app had a bumpy public debut this month after a long invite only stage. Now where Amazon's AV please, where its AV play stands apart is in the design. Unlike Waymo, which retrofits Jaguars with lidar, the Zoox EV Robo Taxi was built from scratch around sensors in software. Hence that sleek compact look. Their tech chief told CNBC that the team delayed launch in part to nail the aesthetics. Autonomous cars could also benefit Amazon's delivery network. The company already uses autonomous robots in its warehouses. And you'd have to imagine that an AV strategy would help streamline e commerce fulfillment. End to end guys.
- [42:23]
Mike Santoli
Mac, is the idea that, I mean who knows how the business develops from this experiment or whatever it is is, is Amazon going to own this? Do they want to be owners of fleets of robotaxis or individuals going to be able to able to have it as a, as a franchise?
- [42:38]
Mackenzie Segalos
Well right now we're talking about commercial rollout on the Las Vegas strip. There's plans to come to San Francisco and then to Austin and Miami. So we are talking about going to head going head to head with the same target audience for Waymo. But you have to imagine that this kind of AV strategy would benefit its large distribution network across the US And I will say in terms of Tesla's play here, you look at its market cap, it's what 187 forward P E And a lot of that has to do with a baked in AV strategy. Even though it hasn't really realized rollout in the same way that Waymo has.
- [43:13]
Mike Santoli
At this point for sure. Mackenzie, thank you. I would imagine Vegas is actually a pretty good place to as an experiment. It's just up and down the strip. Most of the rides are just kind of one hotel to the next into the mall and whatever my experience to the mall.
- [43:29]
Melissa Lee
Coming up. Check out today's mystery chart here. Is down 35% on pace for its worst day ever after disappointing earnings. We'll reveal it in rapid fire. That's next. Catch you up on a few more stock stories on our radars. It is time for rapid fire and we start off with crypto holding companies. They are getting crunched today. Shares a strategy down more than 17% over the past month. Month while kindly Maryland a health services provider which holds Bitcoin through subsidiary has seen its value cut in half. Bitcoin is down about 4% over the same time frame. Tom Lee's bit mine Immersion Technologies, he's the chairman of the company that focuses on Ether. That's lower by about 9% in a month while ether is up about 3% during that time. There's some aspect of regulatory scrutiny. You know that sort of wild card was put out there.
- [44:16]
Mike Santoli
The Nasdaq was looking at this heritage. Absolutely. And I mean there's so many of these like shell penny stock companies have been kind of, you know, converted to it. You know, it's jumped the shark multiple times. I'm not here to say it's over.
- [44:28]
Melissa Lee
Right.
- [44:29]
Mike Santoli
But the notion of buying underlying crypto at a premium price to the public markets only makes sense in a limited fashion.
- [44:37]
Melissa Lee
Yeah. And by the way, the Nasdaq looking into this, it is only for moneys that were approved, not specifically to buy a crypto, crypto. So previous convertible offering that was then used to buy crypto. Did shareholders really approve that? And that that sort of the question. Next up, short selling on Applovin this week climbing to levels not seen since March. This according to S3 Partners. AppLovin shares have gained more than 75% this year. Squeezing shorts for more than $3 billion over the past six months.
- [45:06]
Mike Santoli
Sounds like a lot of money if you're losing it I guess relative to the market cap. It's not. But you know, added to the S&P 500 earlier this week and so that's like the perfect entry point if you're looking for one as a short seller saying well this is kind of a non fundamental burst higher in the price maybe that allows me to bet that it goes down from here.
- [45:24]
Melissa Lee
All right, and let's get to topic number three. That would be synopsis that is down 35% on a revenue and guidance miss. Weakness in their IP business. China export restrictions all headwinds in the latest quarter. It expects China challenges to carry over into to next year. It's interesting because they also mentioned intel and the reorganization at intel as reasons why they are losing orders.
- [45:44]
Mike Santoli
Yes, yes. So. So there were lots of these projects that didn't come through. It shows you how delicate making your numbers is if you're a software company. Like basically lots of stuff has to break. Right. And it didn't for that.
- [45:54]
Melissa Lee
Yeah. And we could squeeze one more in. Mortgage demand jumping to the highest level in three years last week. Big drop in rates getting home buyers off the sidelines. Homebuilders initially higher but they are now all.
- [46:05]
Mike Santoli
They did have a really good run though as the 10 year yield came all the way back down. We don't know what the magic threshold is for mortgage rates to get real activity going again, but so far, application's up. All right, that's going to do it for us. Thank you for watching the Exchange.
- [46:19]
Melissa Lee
You've been listening to the Exchange.
- [46:21]
Leslie Picker
Make sure you're subscribed to get each.
- [46:23]
Melissa Lee
Episode every day, same time, same place.
- [46:28]
Sempra Energy Announcer
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